British homebuilder Vistry has announced that it will be shifting its focus solely onto its affordable homes business, as the country’s broader housing sector experiences a slowdown. This decision comes as housebuilders in the UK face challenges due to the Bank of England’s consecutive interest rate hikes, which have impacted profit margins and demand. In response to this, Vistry’s shares rose by approximately 11% to a one-year high of 893 pence in early trade.
Recent industry indicators, such as mortgage approvals and house prices, have shown a decline. Mortgage lender Halifax reported a 4.6% annual drop in house prices, the fastest pace since 2009. Against this backdrop, Vistry has been working alongside local government authorities and housing associations to construct affordable homes. This focus on affordable housing has proven successful for the company, as its Partnerships division has outperformed its Housebuilding unit, which operates similarly to rival builders.
Speaking about the decision, Vistry’s CEO Greg Fitzgerald emphasized the increasing need for affordable mixed tenure housing across the country. Fitzgerald stated, “The scale of the social need for affordable mixed tenure housing across the country continues to increase and it is clear that Vistry is uniquely positioned as the leader in partnerships housing.”
Vistry plans to merge its Partnerships business with its Housebuilding operations by the end of the 2023 fiscal year. This strategic shift will allow the company to concentrate on its affordable housing model, which is described as “high-return, capital-light, and resilient.” Analysts from Peel Hunt lauded this change, stating that it removes any uncertainty about Vistry’s mixed model and focuses the company on a less volatile segment of the housing market that has a high demand.
Last September, Vistry strengthened its Partnerships business through the acquisition of rival Countryside for £1.25 billion ($1.56 billion). Looking ahead, the company aims to return £1 billion to shareholders over the next three years. It also plans to launch an initial share buyback program worth up to £55 million in November. Despite a drop of over 8% in adjusted pretax profit to £174 million for the six months ending June 30, Vistry reiterated its forecast for annual pretax profit to exceed £450 million.
This shift in strategy by Vistry reflects the challenges faced by British housebuilders in the current economic climate. By focusing on the affordable housing sector, the company aims to capitalize on a growing demand for such homes while mitigating the risks posed by the broader housing market. With this decision, Vistry is positioning itself as a leader in partnerships housing and is set to make significant strides in the affordable homes market in the coming years.
More detail via ETRealty.com here… ( Image via ETRealty.com )